Pensions - Articles - Focus on endgame as DB pension closures continue


Barnett Waddingham publishes its annual analysis of DB schemes in the UK with assets over £1bn. As the only research of its kind, it highlights the continued decline in DB schemes and the shifting focus of employers towards the DB pensions endgame.

 The seventh annual survey shows only 52% of final salary schemes remain open to future accrual - a decrease compared to last year’s 57% - and just 3% open to new joiners, reflecting the continued decline of DB pension provision. As well as encouragement from the Pensions Regulator, the continued closure and the ageing membership of DB schemes will be focusing the attention of trustees and companies on the endgame process.

 Liability management exercises are useful levers for companies and schemes in managing the endgame process and continue to increase in popularity. Around 95% of schemes experienced an increase in transfer value payments, and around a third of schemes saw an increase in transfer value payments of 200% or more - considerably higher than the 7% of schemes above this threshold last year; this reflects an increase in the number of companies and schemes undertaking exercises as part of a structured endgame process focused on reducing balance sheet risk and cost.

 Andrew Vaughan, Partner at Barnett Waddingham, said; “Companies have clearly decided that the future of pension provision lies away from DB pensions, but what does that actually mean for those companies managing a legacy DB pension scheme?

 “For the seventh year in a row, our unique insights show a continued decrease in the number of schemes remaining open to the future accrual of benefits. The focus of companies should now be shifting to the endgame for their DB pension scheme - defining an achievable target and a clear strategy for how they are going to get there successfully.

 “The UK’s largest schemes will again be leading the way in developing innovative strategies to manage the final chapters of DB pension provision, with the smaller schemes following suit. Efficient risk management of DB schemes over their remaining lifetime will now be the primary objective for companies – a stark contrast from the original purpose of operating a DB scheme.”
  

 Barnett Waddingham Research Paper

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